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Chap 7 sm full
 

Chap 7 sm full

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strategic management

strategic management

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    Chap 7 sm full Chap 7 sm full Presentation Transcript

    • Strategy Formulation: Corporate Strategy
    • Corporate Strategy
      • Three Key Issues:
      • Firm’s directional strategy
      • Firm’s portfolio strategy
      • Firm’s parenting strategy
    • Corporate Directional Strategies
    • Corporate Strategy
      • Directional Strategy:
        • Orientation toward growth
          • Expand, cut back, status quo?
          • Concentrate within current industry, diversify into other industries?
          • Growth and expansion through internal development or acquisitions, mergers, or strategic alliances?
    • Corporate Strategy
      • Directional Strategy:
        • Three Grand Strategies:
          • Growth strategies
          • Stability strategies
          • Retrenchment strategies
    • Corporate Strategy
      • Growth Strategies:
        • Most widely pursued strategies
        • External mechanisms:
          • Mergers
            • Transaction involving two or more firms in which stock is exchanged but only one firm survives.
          • Acquisition
            • Purchase of a firm that is absorbed as an operating subsidiary of the acquiring firm.
          • Strategic Alliance
            • Partnership of two or more firms to achieve strategically significant objectives that are mutually beneficial.
    • Corporate Strategy
      • 2 Basic Growth Strategies:
        • Concentration
          • Current product line in one industry
        • Diversification
          • Into other product lines in other industries
    • Corporate Strategy
      • Basic Concentration Strategies:
        • Vertical growth
        • Horizontal growth
    • Corporate Strategy
      • Concentration:
        • Vertical growth
        • Vertical integration
          • Full integration
          • Taper integration
          • Quasi-integration
        • Backward integration
        • Forward integration
      • Benefits of Vertical Integration
          • reduces or eliminates costs of buying and selling (Transaction Costs)
          • smoother, more efficient operation
      • Limits to Vertical Integration
          • Differences in minimum efficient scale in vertically integrated corporation.
          • Must remain innovative in all Value Chain activities.
          • Possible incompatibilities between managerial skills and corporate cultures that make upstream and downstream activities successful.
    • Corporate Strategy
      • Concentration:
        • Horizontal Growth
        • Horizontal integration
      • Coordinating across the same or similar value chain activities.
      • Horizontal Integration Benefits:
      • Corporate managers have expertise to recognize undervalued stocks that many individual investors would miss.
      • Corporations have economies of scale for financing acquisitions that individuals do not.
      • Horizontal Integration Costs:
      • Conglomerate discount: value of stock of conglomerate sells for less than total value of individual stocks.
      • Takeover premiums: corporations usually pay a premium over the normal trading price of the target’s stock.
    • Corporate Strategy
        • Basic Diversification Strategies:
        • Concentric Diversification
        • Conglomerate Diversification
    • Corporate Strategy
      • Diversification:
        • Concentric:
        • Growth into related industry Related-Diversified Firm : Less than 70 percent of firm revenues comes from a single business unit, and different business units share numerous links and common attributes.
        • Search for synergies
    • Corporate Strategy
      • Diversification:
        • Conglomerate:
      • Growth into unrelated industry Less than 70% of firm revenues comes from a single business, and there are few, if any, links or common attributes among businesses.
        • Concern with financial considerations
    • Corporate Strategy International Entry Options Exporting Licensing Franchising Joint Ventures Acquisitions Green-Field Development Production Sharing Turnkey Operations BOT Concept Management Contracts
    • Corporate Strategy
      • Stability Strategies:
        • Pause/proceed with caution
        • No change
        • Profit strategies
    • Corporate Strategy
      • Retrenchment Strategies :
        • Turnaround
        • Captive Company Strategy
        • Selling out
        • Bankruptcy
        • Liquidation
    • Corporate Strategy
      • Portfolio Analysis
        • How much of our time and money should we spend on our best products to ensure that they continue to be successful?
        • How much of our time and money should we spend developing new costly products, most of which will never be successful?
    • Corporate Strategy
      • Portfolio Analysis
      • BCG (Boston Consulting Group) Matrix
        • Product life cycle and funding decisions
          • Question marks
          • Stars
          • Cash cows
          • Dogs
    • BCG Matrix
    • GE Business Screen
      • Long-term industry attractiveness
      • Business strength/competitive position
    • General Electric’s Business Screen Source: Adapted from Strategic Management in GE , Corporate Planning and Development, General Electric Corporation. Used by permission of General Electric Company. A Winners Winners B C Question Marks D F Average Businesses E Winners Losers G Losers H Losers Profit Producers Strong Average Weak Low Medium High Business Strength/Competitive Position Industry Attractiveness
    • International Portfolio Analysis
      • 2 Factors:
      • Country’s attractiveness
        • Market size, rate of growth, regulation
      • Competitive strength
        • Market share, product fit, contribution margin, market support
    • Portfolio Matrix for Plotting Products by Country Harvest/Divest Combine/License Invest/Grow Dominate/Divest Joint Venture Low High High Low Competitive Strengths Country Attractiveness Selective Strategies
    • Corporate Strategy
      • Portfolio Analysis
      • Advantages:
        • Top management evaluates each of firm’s businesses individually
        • Use of externally-oriented data to supplement management judgment
        • Raises issue of cash flow availability
        • Facilitates communication
    • Corporate Strategy
      • Portfolio Analysis
      • Disadvantages:
        • Difficult to define product/market segments
        • Standard strategies can miss opportunities
        • Illusion of scientific rigor
        • Value-laden terms
    • Corporate Strategy
      • Corporate Parenting:
      • Views the corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units.
    • Corporate Strategy
      • Corporate Parenting:
      • Strategic factors
        • Those elements of a company that determine its strategic success or failure
      • Performance improvement
      • Analyze fit
    • Corporate Strategy
      • Corporate Parenting:
      • Parenting-Fit Matrix
        • Summarizes the various judgments regarding corporate/business unit fit for the corporation as a whole.
    • Corporate Strategy
      • Corporate Parenting:
      • Parenting-Fit Matrix
        • 2 Dimensions
            • Positive contributions parent can make
            • Negative effects parent can have
    • Parenting-Fit Matrix Edge of Heartland Heartland Alien Territory Low High High Low FIT between parenting opportunities and parenting characteristics MISFIT between critical success factors and parenting characteristics Ballast Value Trap
    • Corporate Strategy
      • Horizontal Strategy:
        • Corporate strategy that cuts across business unit boundaries to build synergy across business units to improve the competitive position of one or more business units.